The current low interest rate environment continues to drive demand for fixed rate home loans, new research has revealed.
According to Mortgage Choice's latest national home loan approval data, fixed rate home loans accounted for 20.32% of all loans written throughout the month of August – up slightly from 20.24% the month prior.
“Today's slight lift in fixed rate demand is largely unsurprising,” Mortgage Choice chief executive officer John Flavell said.
“In August, the Reserve Bank of Australia cut the cash rate by 25 basis points, taking the official rate to the new low of 1.5%.
“But while the official cash rate was cut by 25 basis point, Australia's lenders failed to pass on the rate cut in full, with some cutting their residential home loan rates by just 12 basis points.
Given the Reserve Bank of Australia held the cash rate at 1.5% in September, we might start to see more interest in fixed rate home loans as people start to question if now is a good time to lock in a rate. If the Reserve Bank does cut the cash rate again, it is clear that Australia's lenders are unlikely to pass on the full rate reduction.”
Moving forward, Mr Flavell said he wouldn't be surprised to see demand for fixed rates rise further as borrowers look to take advantage of the low fixed rate environment and no longer see benefit in waiting for the RBA to drop rates further.
Across the country, fixed rate demand was highest in Western Australia, with this type of product accounting for 25.78% of all home loans written throughout the month of August.
Queensland and New South Wales were not far behind, with fixed rates accounting for 24.72% and 22.91% respectively of all loans written.
Demand for fixed rate home loans was lowest in Victoria, with this type of product accounting for just 9.06% of all loans written.
Overall, variable rates were the most popular product amongst borrowers, with ongoing discount rates accounting for 45.14% of all loans written.